A Settlement Agreement is a legally binding contract between an employee and employer. The employee will agree to waive most of their legal rights against the employer in return for compensation. Either an employee or employer can propose entering a Settlement Agreement.

A Settlement Agreement will save the expense of bringing a claim in an employment tribunal which has increased in recent years due the cuts in legal aid and the introduction of tribunal fees. If an employee enters a Settlement Agreement, the employer will pay a contribution toward an employee receiving independent legal advice.  Without that advice, the Settlement Agreement is not wholly effective.  This fee paid by the employer normally means that the employee does not have to pay anything for that advice.

Despite the employer paying, the employee is the lawyer’s client.  As such, they should get the best advice, even if that is to not to sign, but to sue the employer. We give that advice where the amount offered is not enough and it is in the employee’s best interest to sue.

Recent employment tribunal statistics published show that there has been a drop in the amount of claims being brought in employment tribunals. This may be due to an increased use of Settlement Agreements.

A Settlement Agreement cannot only save the employee money but it can also provide a quicker conclusion to an employment dispute, which offers a clean break situation for both the employee and employer.